Section 4 Obligations with regard to casualties and claims
10.4.1 Member’s obligations at a casualty
10.4.1.1 Member’s obligations to take action
The first part of this provision is self-evident: – when an accident has occurred which may cause a claim for compensation under these Rules, the Member has an obligation to take action to limit its extent and consequences. As mentioned under 2.3. the overarching principle is that the Member is expected to act as a “prudent uninsured”, meaning that the presence of insurance should be no reason not to act prudently at all times in order primarily to avoid and secondarily to minimise costs, liabilities and expenses which may be covered by the insurance.
This is part of the Member’s basic obligation not only under these Rules but in relation to those who have suffered damage. The Member is expected to have his organisation available for this purpose with no right to compensation other than that which would follow under Rule 4 Section 6 or Rule 8 Section 2.
10.4.1.2 “Reasonable steps”
The clause requires the Member to take steps which are reasonable. The possibilities of mitigating a loss may be restricted by risks involved to the ship, people or cargo on board. There may also be legal restrictions as to what an Owner is able to do. Customs or health authorities may not allow handling or reconditioning of damaged cargo. Unauthorised use of chemical detergents to clean up an oil spill may cause even worse damage or incur greater liabilities than the pollution itself.
10.4.2 Member’s obligation to notify promptly
It follows from the provision that the Member should notify the Club promptly of any incident likely to be covered under these Rules. This can be done in a number of ways none of which takes precedence. The Master, who is usually closest to the scene of the accident, may inform the Owner and the nearest Club correspondent. All particulars necessary to establish contact with the correspondent at any time of day or night are included in the Club’s List of Correspondents posted on The Swedish Club’s website. If the matter is reported to the ship’s local agents, they should be instructed to liaise urgently with the Club correspondent concerned.
If no assistance is available, despite persistent attempts, the Master must act alone. This may involve the appointment of a surveyor to act on the Owner’s behalf.
10.4.3 Formal enquiries and legal proceedings
10.4.3.1 General comments on formal enquiries and legal proceedings
According to this part of the provision the Member has an obligation to notify the Club promptly regarding formal enquiries in connection with an accident and the filing and development of legal proceedings.
Formal hearings before courts or other competent authorities often follow immediately after an accident has occurred. This is the opportunity when much of the contemporary and crucial evidence is collected. It is important that the Club is notified in time to make all necessary preparatory investigations and inquiries so as to be able to attend and protect the Member’s interests.
10.4.3.2 Sea protests
It is often asked whether a Master should make a formal sea protest after an accident or after having encountered bad weather during a voyage. Generally the position is as follows: in most parts of the world, the courts apply the principle of the free evaluation of proof. This means that the evidence presented does not need to be in any special form such as a sea protest. A bad weather defence under the Hague or Hague-Visby Rules (see the comments under 126.96.36.199) can be supported by other evidence such as log extracts, statements from the ship’s officers or reports from meteorological stations. A sea protest is just one way of meeting the burden of proof. The filing of a sea protest does not of itself have the effect of relieving the ship of liability nor does it have an enhanced status as evidence of the facts which it states. Those facts are rebuttable and subject to scrutiny. Even if a sea protest is required as proof of bad weather in the country where the discharging took place, the dispute when a claim is filed, may be decided elsewhere. The effect and status of a sea protest is thus limited. Still, courts in some countries, such as Brazil, only accept evidence of liability exceptions if submitted in the form of or substantiated by a formal sea protest. If in doubt, the Club correspondent should be contacted and will advise the Master of the appropriate process.
10.4.3.3 Service of writs
If legal proceedings have been instituted against a Member, a claim form or writ will be served and will be followed during the proceedings by other documents. All such documents must be treated as extremely important. They should be forwarded immediately to the Club, even if the matter is already in the hands of the Club’s lawyer. Failure to comply with the contents of such documents in a timely manner may have serious adverse consequences for the Member’s position in the proceedings. It may result in a judgment by default being entered which might then be difficult or impossible to reverse. There is no compensation for judgments by default.
10.4.3.4 Service of notification to appoint arbitrator
A similar situation, which may also have serious consequences for a Member, is when a notification of appointment of an arbitrator under a charterparty or other contract has been received. Unless an arbitrator is nominated in a timely manner on the Member’s behalf, the opponent’s arbitrator may, in default, act as a sole arbitrator. Depending on the circumstances this might not be in the Member’s best interests. A Member who has received or been served a notice of appointment of an arbitrator should immediately contact the Club for assistance to have a suitable arbitrator appointed on the Member’s behalf.
10.4.4 Handling of claims
10.4.4.1 Filing of claims
For several reasons a Member should immediately contact the Club once it is aware that a claim has been filed against it. The investigations necessary to prepare the Member’s defence must start as soon as possible and while the evidence is still available (see the comments under 188.8.131.52). The Member’s position against other parties may also have to be protected, for instance by commencing a recovery against shippers or Charterers or, at least, preventing such actions from becoming time-barred. The case has to be registered by the Club and the exposure evaluated and added to the Member’s record on which renewal premiums are based. As regards the time bar of the Member’s claims for compensation from the Club, please refer to Rule 15.
10.4.4.2 Claims handling routines
The successful handling of a claim requires close co-operation between the Club and the Member. It is in the interest of both parties that the claims handling routines are simple yet effective.
Each new claim reported is given a file reference number by the Club which serves as an identification and ought to be quoted in all correspondence as the case reference. The unique number is based on the year of the claim and four numbers, for example 20201234. This number is used when the claim is stored electronically.
10.4.4.3 Member to support Club in handling of claim
Throughout the handling of a case, the Member must provide the Club with all documents and information which in the Club’s opinion are relevant to the case. As mentioned in the comments to a number of Rules, the only way to avoid or reduce liabilities is for the Member to meet a specific burden of proof. The source for such evidence is the Member and his employees both on board and/or ashore. Without their full support and co-operation, the Club can be hampered in the assistance it can give to protect and defend the Member.
The obligation for the Member to provide documents and evidence and to produce any person for interview or evidence applies to the handling of all cases under these Rules, regardless of whether there is or may be a dispute between the Club and the Member.
It follows from the opening sentence of this provision that the Member must take reasonable steps throughout the handling of the case to minimise liabilities and costs.
In court or arbitration proceedings and during other stages of the handling of a case, it is often necessary to produce officers, members of the crew or other employees as witnesses to assist the Member’s legal team and (in some cases) to testify in court or arbitration proceedings. The Club and its lawyers are aware of the difficulties of having the Master or the Chief Officer leave the ship to attend a hearing held in another part of the world. Still, the Member has an obligation to comply with such a request where the Club – all aspects considered – decides that attendance is necessary for the proper defence of the case. Wages are not compensated but travel and hotel costs generally are. The costs for a relief officer are paid.
10.4.4.5 Shipboard investigations
According to the third paragraph of the provision the Member must allow the Club access to the ship at any time to conduct any investigations the Club considers necessary. This obligation is in respect of anyone the Club cares to nominate to perform the investigation. It could be the Club’s staff, its representatives, lawyers, surveyors or experts.
In the aftermath of an accident there may be many people around to see the Master, ask questions and request documents or other evidence. Some of them may represent prospective claimants who are fishing for evidence. It is recommended that officers are diligent in ascertaining precisely which party or parties an individual represents when seeking access to the vessel, the crew and the ship’s papers. Information should only be volunteered to the person who can identify himself as acting for The Swedish Club (and not just any P&I Club) or whose identity has been cleared by the Club, the Member or his local agents.
10.4.4.6 Member should not admit liability
As appears from the fourth paragraph of the provision, the Member should not admit liability or settle any claim without the Club’s approval. The Club will investigate, evaluate and negotiate any claim. This may be prejudiced if a Member makes admissions regarding the facts and law.
There are situations when a Master can be asked or put under pressure to “admit liability” before being cleared to sail. Masters should be instructed not to give in to threats of that kind but, instead, seek urgent assistance from the Club, either directly through its local correspondent or through the intermediary of the Member or the local ship agent. If a document has to be signed, it should be noted on it, in writing that the signing is only to confirm the receipt of the document and is in no way an admission of liability. A suitable sentence could read:
“Signed for receipt only with no admission of facts and/or liability
10.4.4.7 Authority for Member to settle claims
Despite what is said above, the Club may be prepared, in certain circumstances, to consider giving certain Members or their local agents a limited authority to settle minor claims without prior reference to the Club or its representatives. It is a condition that the Club is reasonably familiar with the service the Member operates and the experience and ability of the Member and his agents to handle such claims. The authority must have an agreed upper limit above which claims should be referred to the Club and handled in the normal way. For record purposes, claims settled must be reported regularly. The purpose of such a system is to reduce costs and administration for the handling of routine and minor claims. The inception of the system must be preceded by discussions between the Member and the Club and the outcome must be followed up.
10.4.4.8 Settlement of claims
It is the Club’s policy to keep a Member informed and involved in the handling and settlement of claims for several reasons. One important reason is that the Club depends heavily on documents and information from the Member to satisfy the burden of proof. Claims arising should inspire Members to improve their ships and safety routines on board and ashore.
Finally, claims are connected with the Member’s relations with his customers and may affect his commercial reputation in the freight market. The Club cannot support payments to please important customers. Payments compensated by the Club under these Rules should reflect the Member’s legal liability. Anything beyond that will have to be paid by the Member himself.
The opposite situation can occur viz. that the Club wishes to settle a claim, whereas the Member wants to carry on legal proceedings in the hopes of eventually winning. The Club’s policy is the following: the Club has a general obligation to spend as little as possible of the Member’s money. In certain situations a settlement may present a less costly alternative to litigating the matter with an uncertain result. The settlement might be recommended by the Club because, in its view, it represents a sensible commercial resolution to the dispute when all legal arguments have been fully explored and appear unlikely to prevail, whereas the Member may still want to leave the matter for the court or tribunal to determine in the hope of obtaining a more favourable but unlikely outcome. In such cases, although infrequent in number, the Club may limit the compensation to the recommended settlement amount. The Club may also discharge its obligations by putting up the recommended amount and letting the Member carry on the handling of the case but at his own risk and expense.
10.4.5 Effect of Member’s breach of his obligations
If a Member is in breach of his obligations under this clause to avoid, report, investigate or handle claims, the Club may reject or reduce any compensation owing to the Member.